Oct 9, 2018, by Lorcan Roche Kelly
The U.S. Treasury selloff continues, with the yield on the 10-year benchmark hitting 3.25 percent, the highest since May 2011. The move comes as the market braces for $74 billion in new supply this week with sales of three-, 10- and 30-year bonds due. Morgan Stanley threw in the towel on its U.S. curve-flattening call for 2018 in a note titled “Our mea culpa,” saying strong economic data had caused investors to reevaluate prospects for both Fed policy and growth.
The International Monetary Fund cut its forecast for global growth to 3.7 percent for this year and next, down from 3.9 percent previously. It blamed escalating trade tensions and stresses in emerging markets for the reduction. The policy lender warned of a recession in Argentina and slower growth in Brazil, while calling for sweeping reforms to shield Turkey’s economy following the recent drop in the lira. Pakistan, meanwhile, has said that it will seek the country’s 13th IMF bailout since the late 1980s.
Not backing down
Chinese Commerce Minister Zhong Shan said that the U.S. shouldn’t believe that ever-higher tariffs can force the country’s government to capitulate to American demands. The comments in a written statement to Bloomberg highlight the impasse between the world’s two largest economies. The Trump administration is getting uneasy about the depreciating yuan, which saw its lowest daily fixing in more than a year today. The Treasury Department is weighing whether to name the country a currency manipulator in a report due out next week.
Overnight, the MSCI Asia Pacific Index fell 0.9 percent for a seventh day of losses while Japan’s Topix index ended the session down 1.8 percent. In Europe, the Stoxx 600 Index was 0.3 percent lower at 5:45 a.m. Eastern Time as Italian stocks reversed early-session gains in a market with few regional bright spots. S&P 500 futures pointed to a drop at the open, the 10-year Treasury yield was at 3.254 percent and gold was flat.
Fast-moving Storm Michael is strengthening as it heads towards Florida, where it’s expected to make landfall tomorrow as a hurricane. Oil was trading higher, with a barrel of West Texas Intermediate at $74.74 this morning as weather-related disruption curbed oil output in the region. Cotton prices hit a one-week high as much of the crop in Georgia and Alabama has yet to be harvested.